free supplies GST

[Madhavan iyengar]

A Company X based in delhi is a distributor of product a manufacturer Y

Y supplies Free of Cost product to X X in turn Distributes it free of Cost to its customer

Whether any GST implication on X on FOC supply made to its Customer( since no ITC is claimed on the FOC material by X so no ITC reversal is required when same material is supplied as FOC to Customer )

X need not discharge any GST also since there is no supply being FOC

[Rajagopalan Ranganathan]

Sir,

According to Schedule-I of CGST Act, 2017 the following ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business :

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods -

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

4. Import of services by a [person] from a related person or from any of his other establishments outside India, in the course or furtherance of business.

In your case if X and Y are not related not ax is payable. If they are related then supply of goods even wthout consideration ia liable to gst.

[Ganeshan Kalyani]

Sir, the element of consideration is missing. In my view, there is no gst payable by X when he distributes goods free of cost to its customer. At the same time there is no question of reversal of input tax credit as X has not claimed any credit as the goods was received without any consideration.

[KASTURI SETHI]

I agree with Sh.Ganeshan Kalyani Ji. It is a sort of discount and pre-known to the buyer.

AI Summary

No GST on Free Product Distribution by X Without Consideration; Applies If X and Y Are Unrelated Entities. A company, X, based in Delhi, distributes products from manufacturer Y for free to its customers. The query discusses whether there are any GST implications for X on these free-of-cost (FOC) supplies, especially since no input tax credit (ITC) is claimed or reversed by X. One response highlights that under the CGST Act, certain activities are treated as supply even without consideration, but this applies only if X and Y are related entities. Other responses agree that since there is no consideration involved, X is not liable to pay GST on the FOC distribution.